1 00:00:02,520 --> 00:00:13,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 2 00:00:13,840 --> 00:00:17,920 Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern 3 00:00:18,200 --> 00:00:22,000 Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business app. 4 00:00:22,360 --> 00:00:25,680 Speaker 1: Listen on demand wherever you get your podcasts, or watch 5 00:00:25,760 --> 00:00:26,960 Speaker 1: us live on YouTube. 6 00:00:27,160 --> 00:00:29,240 Speaker 2: It has been too long. Brian Levitt joins us right 7 00:00:29,280 --> 00:00:32,880 Speaker 2: now with Invesco with a really interesting and holistic view 8 00:00:33,000 --> 00:00:37,240 Speaker 2: of tying it together to have confidence to invest. Parktrin 9 00:00:37,280 --> 00:00:40,960 Speaker 2: from the University of Michigan. Can you write a midyear 10 00:00:41,000 --> 00:00:45,440 Speaker 2: review right now? June thirty becons, July onet becons. Is 11 00:00:45,479 --> 00:00:49,000 Speaker 2: it possible to do an Invesco midyear review? Yeah? 12 00:00:49,000 --> 00:00:50,960 Speaker 3: I would say the midyear review is set up for 13 00:00:50,960 --> 00:00:55,320 Speaker 3: the economy was good. We got policy on certainty. Policy 14 00:00:55,400 --> 00:00:58,880 Speaker 3: uncertainty got worse than it was expected, led to some 15 00:00:59,080 --> 00:01:05,440 Speaker 3: recession fee, and then policymakers generally backing off at least 16 00:01:05,440 --> 00:01:09,560 Speaker 3: pauses with regards to tariff's federal reserve, perhaps sounding maybe 17 00:01:09,560 --> 00:01:12,440 Speaker 3: a little bit more dubbish. And so the market is 18 00:01:12,560 --> 00:01:18,800 Speaker 3: now set up for expectation of incrementally continued improvements with 19 00:01:18,880 --> 00:01:19,920 Speaker 3: regards to policy. 20 00:01:20,840 --> 00:01:21,800 Speaker 4: How about the federal reserve? 21 00:01:21,800 --> 00:01:23,760 Speaker 5: What kind of policies should we expect from the Federal 22 00:01:23,760 --> 00:01:28,400 Speaker 5: Reserve here today? It feels like the economic data that 23 00:01:28,440 --> 00:01:31,320 Speaker 5: they rely upon suggest that maybe they kind of sit 24 00:01:31,400 --> 00:01:32,520 Speaker 5: on their hands a little bit here. 25 00:01:32,720 --> 00:01:33,840 Speaker 2: Yeah, they may sit on their hands. 26 00:01:33,880 --> 00:01:37,360 Speaker 3: I think ultimately we're going to see rate cuts, and 27 00:01:37,440 --> 00:01:40,440 Speaker 3: so the market, whether that comes in a month or 28 00:01:40,600 --> 00:01:43,360 Speaker 3: six months, the market believes that interest rates on the 29 00:01:43,360 --> 00:01:46,160 Speaker 3: short end are going lower, and I suspect that's ray. 30 00:01:46,160 --> 00:01:47,960 Speaker 3: I mean, we all know the Feds in a little 31 00:01:47,960 --> 00:01:51,280 Speaker 3: bit of a bind because growth is likely to slow, 32 00:01:51,440 --> 00:01:54,760 Speaker 3: prices are likely to rise as the tariff's effect starts 33 00:01:54,800 --> 00:01:58,320 Speaker 3: to hit. But if you look at leading indicators for 34 00:01:58,640 --> 00:02:02,840 Speaker 3: the employment market and for the inflation story, you've got 35 00:02:02,920 --> 00:02:07,360 Speaker 3: jobless claims ticking up a bit, You've got inflation expectations 36 00:02:07,480 --> 00:02:10,720 Speaker 3: very stable in the bond market, and so the Fed 37 00:02:10,840 --> 00:02:12,600 Speaker 3: is likely to the air on the side of easing. 38 00:02:13,120 --> 00:02:17,680 Speaker 2: What I really this is really important question, folks. Everybody 39 00:02:17,720 --> 00:02:20,800 Speaker 2: out there go to cash and market timing and that 40 00:02:21,360 --> 00:02:26,000 Speaker 2: what is the Levitt prescription to get back in the market. 41 00:02:26,160 --> 00:02:30,239 Speaker 2: When you know you blew it, you feel terrible, you're 42 00:02:30,240 --> 00:02:33,760 Speaker 2: not telling your spouse, loved one what really happened. You've 43 00:02:33,840 --> 00:02:36,960 Speaker 2: missed the boat to a record NASDAC high. How do 44 00:02:37,000 --> 00:02:38,000 Speaker 2: you get back in the game. 45 00:02:38,600 --> 00:02:41,320 Speaker 3: Yeah, it's always a challenge. If you look historically, I 46 00:02:41,360 --> 00:02:44,360 Speaker 3: mean people will talk about dollar cost averaging, or people 47 00:02:44,400 --> 00:02:47,480 Speaker 3: will talk about, you know, slowly moving back into these markets. 48 00:02:47,560 --> 00:02:51,480 Speaker 3: Historically you're better off. Even if you're investing at the 49 00:02:51,520 --> 00:02:55,960 Speaker 3: market high, you're still better off historically than sitting in 50 00:02:56,040 --> 00:02:59,359 Speaker 3: cash or or even dollar cost averaging. So I would 51 00:02:59,400 --> 00:03:02,320 Speaker 3: advise and investors to be in these markets. What you 52 00:03:02,400 --> 00:03:05,720 Speaker 3: can do rather than have it tom be all or nothing, 53 00:03:05,800 --> 00:03:08,360 Speaker 3: I'm in or I'm out, and you can focus if 54 00:03:08,400 --> 00:03:11,320 Speaker 3: you're concerned, you focus more on quality. You focus more 55 00:03:11,360 --> 00:03:14,799 Speaker 3: on businesses that are able to withstand some of the 56 00:03:14,919 --> 00:03:17,519 Speaker 3: challenges that we're dealing with, which is really why Nasdaq 57 00:03:17,720 --> 00:03:21,400 Speaker 3: is back leading again. Could we see an environment where 58 00:03:21,400 --> 00:03:24,359 Speaker 3: market's broaden out, where you want to be more small cap, 59 00:03:24,480 --> 00:03:28,560 Speaker 3: more value, All that sure probably requires some easing and 60 00:03:28,600 --> 00:03:30,240 Speaker 3: a pickup an economic activity. 61 00:03:30,720 --> 00:03:33,080 Speaker 5: So Brian, if the Fed's going to cut maybe once, 62 00:03:33,200 --> 00:03:36,400 Speaker 5: maybe twice this year, that's about it. So it feels 63 00:03:36,400 --> 00:03:38,680 Speaker 5: like if the market's going to move higher, earning is 64 00:03:38,680 --> 00:03:39,240 Speaker 5: are going to come to. 65 00:03:39,280 --> 00:03:40,840 Speaker 4: The forefront yet again. 66 00:03:41,080 --> 00:03:43,360 Speaker 5: Yet I think most investors feel like there might be 67 00:03:43,400 --> 00:03:45,760 Speaker 5: some earnings risk out there. How do you think about 68 00:03:45,760 --> 00:03:46,720 Speaker 5: the earnings outlook here? 69 00:03:46,840 --> 00:03:50,680 Speaker 3: Yeah, there is some earnings risk with regards to what 70 00:03:50,720 --> 00:03:55,400 Speaker 3: we're grappling with with tariffs. I mean everybody's talking about will. 71 00:03:55,120 --> 00:03:56,360 Speaker 4: We see some price shocks? 72 00:03:56,360 --> 00:03:58,440 Speaker 3: Will the consumer feel it? I think we sort of 73 00:03:58,480 --> 00:04:01,560 Speaker 3: hope so, because if not, that these businesses are absorbing 74 00:04:01,880 --> 00:04:04,000 Speaker 3: all of it, which will be a hit to profitability. 75 00:04:04,000 --> 00:04:06,520 Speaker 3: But look, it's still a good backdrop. I mean, if 76 00:04:06,560 --> 00:04:09,440 Speaker 3: you think of the nominal growth environment, you're you're looking 77 00:04:09,480 --> 00:04:11,720 Speaker 3: at you somewhere around four four and a half percent. 78 00:04:11,840 --> 00:04:15,520 Speaker 2: So that's the mist call of the first six months. 79 00:04:15,920 --> 00:04:19,400 Speaker 3: Is nominal GDP nominal GDP state substinate. I mean that's 80 00:04:19,400 --> 00:04:20,839 Speaker 3: why I say the set of coming into the year 81 00:04:20,920 --> 00:04:24,800 Speaker 3: was good. The economy was resilient, inflation was stable, and 82 00:04:24,839 --> 00:04:26,720 Speaker 3: inflation was stable at the upper end of the Fed's 83 00:04:26,760 --> 00:04:29,800 Speaker 3: comfort zone. We hadn't seen that in years. That's a 84 00:04:29,839 --> 00:04:35,080 Speaker 3: good nominal growth backdrop for corporate profitability. Policy can shift that, 85 00:04:35,680 --> 00:04:38,840 Speaker 3: and that's why you had a twenty percent decline following 86 00:04:39,000 --> 00:04:42,880 Speaker 3: going into and following Liberation Day. I think the reality 87 00:04:42,920 --> 00:04:46,799 Speaker 3: with regards to tariffs, is that consumers and businesses can 88 00:04:47,080 --> 00:04:51,280 Speaker 3: make changes, we can adjust. We're really just looking for clarity. 89 00:04:50,839 --> 00:04:53,440 Speaker 5: Brian, talk to just about is there anything that screens 90 00:04:53,440 --> 00:04:55,760 Speaker 5: well for you guys sector wise, factor wise? 91 00:04:56,000 --> 00:04:58,000 Speaker 4: Were you guys having your conversations these days? 92 00:04:58,160 --> 00:05:00,479 Speaker 3: Yeah, I would, I would say on the fact their side, 93 00:05:00,520 --> 00:05:02,840 Speaker 3: it's still a quality story. So we're still in an 94 00:05:02,960 --> 00:05:08,840 Speaker 3: environment where leading indicators are pointing lower, and typically when 95 00:05:08,839 --> 00:05:11,400 Speaker 3: the leading indicators are pointing lower, you're waiting for the 96 00:05:11,440 --> 00:05:15,360 Speaker 3: policy response, and so right now it's a it's more 97 00:05:15,400 --> 00:05:18,839 Speaker 3: of a quality environment. I think we'll get back to 98 00:05:18,880 --> 00:05:22,479 Speaker 3: more of a recovery feel where we get policy response 99 00:05:22,560 --> 00:05:25,560 Speaker 3: and leading indicators pick up, but that that may take 100 00:05:25,600 --> 00:05:28,080 Speaker 3: a bit. On the income side. I still like credit 101 00:05:28,279 --> 00:05:31,000 Speaker 3: thirty seconds. We didn't have you any of your talk markets. 102 00:05:31,200 --> 00:05:33,440 Speaker 3: Danny Wolf of Michigan. Is he the real deal? 103 00:05:34,120 --> 00:05:35,239 Speaker 2: Sure? In the draft tonight. 104 00:05:35,520 --> 00:05:38,479 Speaker 3: I think he's the real deal. You can never go 105 00:05:38,520 --> 00:05:41,839 Speaker 3: wrong having seven footers, right, you know. 106 00:05:42,200 --> 00:05:46,159 Speaker 2: How tall is the guy from Duke six short? Okay, 107 00:05:46,400 --> 00:05:49,160 Speaker 2: Brian Levi, thank you so much. Thank you with the investo. 108 00:05:55,000 --> 00:05:58,599 Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live 109 00:05:58,640 --> 00:06:02,159 Speaker 1: weekday afternoons from se into ten AMI's Durn. Listen on Apple, 110 00:06:02,240 --> 00:06:05,560 Speaker 1: Karplay and Android Otto with the Bloomberg Business up, or 111 00:06:05,720 --> 00:06:07,160 Speaker 1: watch us live on YouTube. 112 00:06:07,360 --> 00:06:09,560 Speaker 2: This is a joy in our studios in New York. 113 00:06:09,640 --> 00:06:12,760 Speaker 2: Is someone definitive in Hong Kong. He's never gotten over 114 00:06:12,800 --> 00:06:15,440 Speaker 2: the redo of the Mandarin mbar where they ruined the 115 00:06:15,480 --> 00:06:18,400 Speaker 2: top of the Mandarin Hotel in Hong Kong. Frederick Newman 116 00:06:18,440 --> 00:06:23,880 Speaker 2: is Chief Asia Economists at HSBC with wonderful Johns Hopkins Academics. 117 00:06:24,160 --> 00:06:27,000 Speaker 2: I'm gonna steal from Paul here. You walked in the 118 00:06:27,040 --> 00:06:30,479 Speaker 2: studio and Paul said, is Hong Kong changed? What is 119 00:06:30,520 --> 00:06:32,240 Speaker 2: the state of Hong Kong today? 120 00:06:32,480 --> 00:06:34,839 Speaker 6: So the economy is still a bit soft. We have 121 00:06:35,120 --> 00:06:38,120 Speaker 6: very high interest rates. We got us interest rates chauness. 122 00:06:38,160 --> 00:06:40,599 Speaker 6: Economy is not doing that well at the moment. But 123 00:06:40,839 --> 00:06:43,680 Speaker 6: there is a real buzz there because we have equity 124 00:06:43,720 --> 00:06:46,680 Speaker 6: markets coming alive, and we had about five years of 125 00:06:46,800 --> 00:06:50,280 Speaker 6: down markets and the kind of the heart. 126 00:06:50,080 --> 00:06:51,400 Speaker 2: Of the city's equities. 127 00:06:51,760 --> 00:06:54,960 Speaker 6: You see cab drivers with their four phones playing, you know, 128 00:06:55,040 --> 00:06:58,000 Speaker 6: equities all day long. And so if you get the 129 00:06:58,160 --> 00:07:00,920 Speaker 6: market come up, you got ipo pine. I'm being full again, 130 00:07:01,000 --> 00:07:03,280 Speaker 6: that really adds a bit of a buzz. So it 131 00:07:03,320 --> 00:07:06,080 Speaker 6: does feel really there's optimism coming back into the Hong 132 00:07:06,160 --> 00:07:07,080 Speaker 6: Kong Financial Center. 133 00:07:07,360 --> 00:07:13,280 Speaker 5: How does this world of trade, tariff's, trade policy uncertainty, 134 00:07:13,320 --> 00:07:15,640 Speaker 5: how's that impacting Asia Pacific region. 135 00:07:15,920 --> 00:07:18,280 Speaker 6: Well, it's a huge headache, right that the region was 136 00:07:18,280 --> 00:07:21,200 Speaker 6: built on exports and a lot of exports to the US, 137 00:07:21,240 --> 00:07:23,240 Speaker 6: and so there's a lot of apprehension. And it's not 138 00:07:23,320 --> 00:07:25,080 Speaker 6: just the exports we worry about. It is also the 139 00:07:25,200 --> 00:07:28,680 Speaker 6: cap X that's associated with it, right, and so that's 140 00:07:28,720 --> 00:07:31,320 Speaker 6: the worry. But on the other hand, if you look 141 00:07:31,360 --> 00:07:34,520 Speaker 6: at China, for example, owned China's exports to the United 142 00:07:34,520 --> 00:07:37,760 Speaker 6: States are only two point five percent of China's economy. 143 00:07:37,800 --> 00:07:39,280 Speaker 6: It's not the end of the world. 144 00:07:39,280 --> 00:07:41,840 Speaker 2: And that slows down again, it's so important. 145 00:07:42,440 --> 00:07:45,320 Speaker 6: China's exports to the United States are only two point 146 00:07:45,440 --> 00:07:49,440 Speaker 6: five percent of China's economy. Now many people intuitively would 147 00:07:49,440 --> 00:07:52,720 Speaker 6: say it's a much larger share, but actually, if you 148 00:07:52,880 --> 00:07:56,400 Speaker 6: add direct and indirect exports, about two and a half percent, 149 00:07:56,640 --> 00:08:00,200 Speaker 6: maybe three if you not everything is statistically captured, but 150 00:08:00,240 --> 00:08:01,280 Speaker 6: it's not more than a three percent. 151 00:08:01,280 --> 00:08:03,600 Speaker 2: I'll give you a statistic. Paul one hundred and twelve 152 00:08:03,600 --> 00:08:05,880 Speaker 2: percent of Americans don't know what. 153 00:08:05,960 --> 00:08:09,800 Speaker 5: For exactly said, So, how are you guys thinking about 154 00:08:09,880 --> 00:08:12,880 Speaker 5: China here in the short term and also that maybe 155 00:08:12,960 --> 00:08:14,440 Speaker 5: intermediate two to three year term. 156 00:08:15,320 --> 00:08:18,720 Speaker 6: So look, even if only two point five percent of 157 00:08:18,760 --> 00:08:20,880 Speaker 6: your experts go to the US, if you're not fifty 158 00:08:20,920 --> 00:08:23,160 Speaker 6: percent of that off, that takes a percentage point off 159 00:08:23,200 --> 00:08:25,640 Speaker 6: your GDP. That hurts in the short run, right, no 160 00:08:25,680 --> 00:08:28,120 Speaker 6: doubt about it. But there's about two and a half 161 00:08:28,120 --> 00:08:31,840 Speaker 6: percent of GDP fiscal stimulus in the pipeline this year, 162 00:08:32,320 --> 00:08:34,960 Speaker 6: and you see a bit of that getting traction. So, 163 00:08:35,000 --> 00:08:37,640 Speaker 6: for example, the past couple of months, you see retail 164 00:08:37,720 --> 00:08:42,000 Speaker 6: sales suddenly accelerating. You see at the companies we speak 165 00:08:42,040 --> 00:08:44,520 Speaker 6: with are actually saying sales are picking up, and so 166 00:08:44,960 --> 00:08:48,200 Speaker 6: there's a bit more stabilization coming through on the domestic side. 167 00:08:48,240 --> 00:08:51,120 Speaker 4: Actually ex China here. 168 00:08:52,440 --> 00:08:54,679 Speaker 5: You know, everybody here in the US, we've become a 169 00:08:54,720 --> 00:08:57,320 Speaker 5: lot smarter about tariffs and kind of where our goods 170 00:08:57,640 --> 00:09:00,600 Speaker 5: come from. And we've learned really since that pandemic that 171 00:09:00,920 --> 00:09:03,479 Speaker 5: a lot of stuff is coming from Vietnam, from Malaysia. 172 00:09:03,120 --> 00:09:04,960 Speaker 4: Other parts of Asia. 173 00:09:05,000 --> 00:09:05,160 Speaker 3: Here. 174 00:09:05,240 --> 00:09:08,360 Speaker 4: Talk to us, ex China, how is Asia doing. 175 00:09:08,720 --> 00:09:11,559 Speaker 6: So big a problem for the other countries. So if 176 00:09:11,559 --> 00:09:15,400 Speaker 6: you take Vietnam, for example, eleven percent of Vietnam's depend 177 00:09:15,880 --> 00:09:18,719 Speaker 6: in the Vietnam Cup depends on American shoppers compared to 178 00:09:18,760 --> 00:09:21,719 Speaker 6: two point five percent in China, So Vietnam is potentially 179 00:09:21,800 --> 00:09:26,520 Speaker 6: much more disruption. Soda is Thailand, sodaes, Korea, sodas Malaysia, 180 00:09:26,880 --> 00:09:29,320 Speaker 6: and so these countries worry a lot about the tariff 181 00:09:29,360 --> 00:09:30,360 Speaker 6: deadlines coming up. 182 00:09:30,600 --> 00:09:33,439 Speaker 2: Frederick Newman with this, will they just see their chief 183 00:09:33,440 --> 00:09:37,280 Speaker 2: economists their voice of Asia this morning. The zeitgeist, I'm 184 00:09:37,320 --> 00:09:39,720 Speaker 2: sure when you're on the plane here, is that the 185 00:09:39,840 --> 00:09:46,079 Speaker 2: tariff pain is being swallowed by Asian manufacturers, particularly Japanese 186 00:09:46,480 --> 00:09:51,240 Speaker 2: car exports and such. They're eating that large new tariff. 187 00:09:51,280 --> 00:09:53,800 Speaker 2: Do you buy it? And will that sustain. 188 00:09:54,200 --> 00:09:58,319 Speaker 6: Only to some extent? Because the Japanese yennas depreciated a 189 00:09:58,360 --> 00:10:01,480 Speaker 6: lot over recent years, right, it seems like they're swallowing it, 190 00:10:01,520 --> 00:10:04,120 Speaker 6: but really only back to twenty twenty one levels in 191 00:10:04,200 --> 00:10:07,680 Speaker 6: terms of your profit margins. Perhaps, so I don't think 192 00:10:07,679 --> 00:10:10,960 Speaker 6: necessarily it's that big a burden for Asia to carry 193 00:10:11,440 --> 00:10:14,880 Speaker 6: in other areas. Actually, Asia will pass on these costs 194 00:10:14,960 --> 00:10:18,720 Speaker 6: because China is the single producer of many, many critical items. 195 00:10:18,720 --> 00:10:22,520 Speaker 6: There's nobody else who can tell you certain medical sort 196 00:10:22,559 --> 00:10:26,000 Speaker 6: of pharmaceutical ingredients. For example, vitamins right can mostly out 197 00:10:26,040 --> 00:10:27,200 Speaker 6: of China these days. 198 00:10:27,520 --> 00:10:30,120 Speaker 5: How do other I'm just I'm looking at your research 199 00:10:30,160 --> 00:10:34,120 Speaker 5: report because it's got a table of your forecast for HSBC. 200 00:10:34,240 --> 00:10:36,079 Speaker 5: In the countries I don't think about as often as 201 00:10:36,080 --> 00:10:40,360 Speaker 5: I do, maybe European, Malaysia, Philippines, Singapore, Indonesia. How did 202 00:10:40,400 --> 00:10:43,880 Speaker 5: those countries interact with China? 203 00:10:44,240 --> 00:10:47,480 Speaker 6: Likely they're in some ways on trade caught to an 204 00:10:47,480 --> 00:10:50,320 Speaker 6: I rock and hard place. China for them, in many 205 00:10:50,360 --> 00:10:53,560 Speaker 6: ways is a larger market than the US, yes, right, 206 00:10:53,600 --> 00:10:56,240 Speaker 6: And so when the US is we don't want your 207 00:10:56,280 --> 00:10:57,960 Speaker 6: good or we're going to put terrius on you, then 208 00:10:58,000 --> 00:11:01,360 Speaker 6: they turned to China. And and so it's in some 209 00:11:01,400 --> 00:11:04,640 Speaker 6: ways if we push these countries too much, essentially it 210 00:11:04,760 --> 00:11:08,680 Speaker 6: drives them, probably economically more into the Chinese orbit. Now 211 00:11:08,720 --> 00:11:12,560 Speaker 6: they also face Chinese competition, so it's really tough for 212 00:11:12,600 --> 00:11:13,800 Speaker 6: them to find the right path. 213 00:11:14,040 --> 00:11:16,720 Speaker 2: And look at your work, Fred Newman at HSBC and folks, 214 00:11:16,720 --> 00:11:19,560 Speaker 2: it is the Hong Kong and Shanghai Banking Corporation with 215 00:11:19,640 --> 00:11:24,319 Speaker 2: a heritage that truly goes back centuries. The only equivalent 216 00:11:24,440 --> 00:11:27,679 Speaker 2: was John Anderson years ago at UBS. And the basic 217 00:11:27,800 --> 00:11:33,280 Speaker 2: idea here is our misunderstanding of what's going on in China. 218 00:11:33,440 --> 00:11:35,840 Speaker 2: And the heart of the matter to me is we 219 00:11:35,920 --> 00:11:40,240 Speaker 2: have a president who thinks it's deal making or unilateral 220 00:11:40,559 --> 00:11:45,600 Speaker 2: or bilateral discussions. But it's truly a multilateral Asia, isn't it. 221 00:11:45,720 --> 00:11:48,240 Speaker 2: I mean, that's the great misconception in America. 222 00:11:48,679 --> 00:11:52,720 Speaker 6: It is a multilateral Asia. The supply chains are completely 223 00:11:52,760 --> 00:11:56,600 Speaker 6: interconnected across the region. Most of the goods coming from 224 00:11:56,720 --> 00:12:01,120 Speaker 6: Vietnam have a very significant component to Chinese share in them, 225 00:12:01,200 --> 00:12:05,480 Speaker 6: so from Malaysia. China is a dominant Asian producer and 226 00:12:05,480 --> 00:12:08,600 Speaker 6: it kind of it's interweaved with all the other economy. 227 00:12:08,720 --> 00:12:11,840 Speaker 2: So, you know, we're weaned on Japan as the foundation 228 00:12:12,040 --> 00:12:16,040 Speaker 2: capitalist society of Asia. Are they still? Is Japan still 229 00:12:16,080 --> 00:12:18,320 Speaker 2: the dominant provider of finance? 230 00:12:19,160 --> 00:12:23,440 Speaker 6: No, no longer. It is an important finance provider, but 231 00:12:23,880 --> 00:12:28,040 Speaker 6: China exports twice as much capital than Japan does, so 232 00:12:28,120 --> 00:12:31,920 Speaker 6: in terms of financing the world economy, it's now China 233 00:12:32,000 --> 00:12:34,240 Speaker 6: that stepped in in. 234 00:12:34,240 --> 00:12:39,800 Speaker 2: The Mandarin Hotel is a little cafe. Remember downstairs. Yeah, 235 00:12:40,160 --> 00:12:42,760 Speaker 2: the little cafe. It was like something out of a 236 00:12:42,800 --> 00:12:46,320 Speaker 2: Bond movie. People in there. I would read five newspapers 237 00:12:46,320 --> 00:12:50,000 Speaker 2: in there is that little cafe still there on bottom. 238 00:12:50,080 --> 00:12:52,959 Speaker 6: They have refurbished it, but they rebuilt that pretty much 239 00:12:53,000 --> 00:12:55,960 Speaker 6: the same way was before. So you little cafe sixties, 240 00:12:56,360 --> 00:12:58,840 Speaker 6: it's still very fifty six. He has been redone, but 241 00:12:58,840 --> 00:13:01,520 Speaker 6: it's still in that old island at cafe. You're still 242 00:13:01,520 --> 00:13:04,600 Speaker 6: there and you still welcome to come and read your newspapers. 243 00:13:04,120 --> 00:13:06,760 Speaker 2: When you When you go to the Imperial Hotel in Tokyo, 244 00:13:07,080 --> 00:13:10,079 Speaker 2: they have a huge lobby which is like a TV 245 00:13:10,240 --> 00:13:13,200 Speaker 2: set for a dream of genie from the nineteen sixties. 246 00:13:13,600 --> 00:13:16,839 Speaker 2: It's actually unbelievable some of the We won't talk about 247 00:13:16,840 --> 00:13:20,160 Speaker 2: Fullerton's Bar in Singapore, now, will we, Fred, Yes, no, 248 00:13:20,280 --> 00:13:23,800 Speaker 2: we won't. Have a few guys, Fred Newman, this has 249 00:13:23,800 --> 00:13:26,880 Speaker 2: been wonderful. Please don't be a honor to have you here. 250 00:13:26,920 --> 00:13:30,520 Speaker 2: He's with HSBC Hong Kong with Perspective. They're really good 251 00:13:30,559 --> 00:13:31,360 Speaker 2: perspective there. 252 00:13:31,800 --> 00:13:35,720 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 253 00:13:35,760 --> 00:13:39,160 Speaker 1: starting at seven am Eastern on Applecarplay and Android Auto 254 00:13:39,200 --> 00:13:42,160 Speaker 1: with the Bloomberg business app. You can also listen live 255 00:13:42,200 --> 00:13:45,800 Speaker 1: on Amazon Alexa from our flagship New York station. Just 256 00:13:45,840 --> 00:13:48,400 Speaker 1: say Alexa play Bloomberg eleven thirty. 257 00:13:49,000 --> 00:13:52,400 Speaker 2: This is a really important conversation right now. He is 258 00:13:52,520 --> 00:13:57,319 Speaker 2: steeped in the international relations of Persia with all sorts 259 00:13:57,360 --> 00:14:01,480 Speaker 2: of abilities as well. His book How Sanctions Work Iran 260 00:14:01,600 --> 00:14:06,800 Speaker 2: in the impact of economic warfare is noted with important economics, 261 00:14:06,880 --> 00:14:12,000 Speaker 2: including the University of Geneva. Oliveez joins us right now, Ali, 262 00:14:12,120 --> 00:14:16,040 Speaker 2: what is a number one thing Americans get wrong about 263 00:14:16,040 --> 00:14:19,000 Speaker 2: the culture, the fabric the people of Persia. 264 00:14:21,280 --> 00:14:24,400 Speaker 7: Well, I think the number one thing is that Persia 265 00:14:24,480 --> 00:14:28,400 Speaker 7: is an ancient nation. It's a country that has seven 266 00:14:28,440 --> 00:14:32,360 Speaker 7: thousand years of history. It had a government three thousand 267 00:14:32,440 --> 00:14:37,440 Speaker 7: years ago, and you know, it is surprisingly still to 268 00:14:37,520 --> 00:14:41,120 Speaker 7: this day, despite having an anti American government in the 269 00:14:41,160 --> 00:14:46,080 Speaker 7: past nearly five decades, a very pro American population, which 270 00:14:46,120 --> 00:14:48,000 Speaker 7: is almost the reverse of what we get in the 271 00:14:48,000 --> 00:14:50,480 Speaker 7: rest of the region, which is we have pro American 272 00:14:50,520 --> 00:14:52,560 Speaker 7: governments but anti American population. 273 00:14:53,520 --> 00:14:56,680 Speaker 5: How representative is the government of Iran of its people. 274 00:14:56,800 --> 00:14:59,560 Speaker 5: Then that's kind of something that I think most Americans 275 00:14:59,560 --> 00:15:01,120 Speaker 5: really don't understand. 276 00:15:02,680 --> 00:15:07,720 Speaker 7: Well, it's not a democratic government. It is an authoritarian government, 277 00:15:08,360 --> 00:15:12,200 Speaker 7: and even its own surveys show that it's eighty five 278 00:15:12,200 --> 00:15:16,680 Speaker 7: percent of the Runian population do not like this regime 279 00:15:16,760 --> 00:15:19,560 Speaker 7: and would like to see it's back, But it has 280 00:15:20,080 --> 00:15:24,200 Speaker 7: ten to fifteen percent of its core constituents who are 281 00:15:24,200 --> 00:15:27,840 Speaker 7: true believers in this system, either for ideological reasons or 282 00:15:27,880 --> 00:15:31,720 Speaker 7: because they have vested economic interest in it, and in 283 00:15:31,760 --> 00:15:35,200 Speaker 7: a way they are very committed to make sure that 284 00:15:35,240 --> 00:15:36,520 Speaker 7: the system survives. 285 00:15:37,520 --> 00:15:40,320 Speaker 5: So I guess one of the issues as we think 286 00:15:40,360 --> 00:15:44,240 Speaker 5: about the conflict between Israel and Iran and then the 287 00:15:44,360 --> 00:15:47,840 Speaker 5: US involvement over the past weekend, people have been talking 288 00:15:47,840 --> 00:15:53,440 Speaker 5: about discussing regime change. Is that something that should be discussed. 289 00:15:53,520 --> 00:15:56,480 Speaker 5: Is it even of a remote possibility in the near 290 00:15:56,480 --> 00:15:57,280 Speaker 5: to intermediate term. 291 00:15:59,280 --> 00:16:01,600 Speaker 7: Well, first thing I would say is that we have 292 00:16:01,680 --> 00:16:04,960 Speaker 7: to look at our track record of bringing about regime 293 00:16:05,040 --> 00:16:06,920 Speaker 7: change in that part of the world, and it has 294 00:16:06,960 --> 00:16:11,400 Speaker 7: been an abject failure after an abject failure. So engineering 295 00:16:11,480 --> 00:16:14,760 Speaker 7: from the outside is not really something that we should 296 00:16:14,800 --> 00:16:19,800 Speaker 7: be looking forward to because of our track record. Second, internally, 297 00:16:20,360 --> 00:16:26,280 Speaker 7: there is right now no viable organized discipline alternative opposition 298 00:16:27,200 --> 00:16:29,760 Speaker 7: inside the country or even outside of the country that 299 00:16:29,920 --> 00:16:34,120 Speaker 7: is able to push US regime over and take power. 300 00:16:34,600 --> 00:16:36,560 Speaker 7: This is not Syria in twenty twenty four, when you 301 00:16:36,640 --> 00:16:39,280 Speaker 7: have rebel group in control of parts of the country 302 00:16:39,320 --> 00:16:41,240 Speaker 7: that could just march into Damascus. 303 00:16:41,840 --> 00:16:44,840 Speaker 2: Your essay in Foreign Affairs, don't give up on diplomacy 304 00:16:45,520 --> 00:16:49,000 Speaker 2: with Iran. Just so important to me is the idea 305 00:16:49,000 --> 00:16:51,120 Speaker 2: of who are we speaking to? Are we speaking to 306 00:16:51,160 --> 00:16:54,600 Speaker 2: the theocracy? Are we speaking to the military that I 307 00:16:54,680 --> 00:16:58,479 Speaker 2: believe supports the theocracy or uses the theocracy? 308 00:17:00,160 --> 00:17:03,400 Speaker 7: You're absolutely right, there's really not much difference. This is 309 00:17:03,440 --> 00:17:09,879 Speaker 7: a militarized theocracy and talking to you know, like Ron's 310 00:17:09,880 --> 00:17:13,159 Speaker 7: FIGN minister, for instance, was formerly a member of the 311 00:17:13,200 --> 00:17:19,320 Speaker 7: Revolutionary Guards. There is really a coexistence between the clerical 312 00:17:19,400 --> 00:17:23,639 Speaker 7: establishment and the revolutionary Guards. It's like the Deep States, 313 00:17:23,680 --> 00:17:25,320 Speaker 7: basically Ali. 314 00:17:25,720 --> 00:17:28,440 Speaker 5: Just since the US attack on around over the weekend, 315 00:17:28,480 --> 00:17:33,359 Speaker 5: there's been conflicting reports from various sources, including the Trump 316 00:17:33,359 --> 00:17:39,080 Speaker 5: administration officials, about the effectiveness of and the damage inflicted 317 00:17:39,160 --> 00:17:41,399 Speaker 5: by the Americans on the nuclear sites. 318 00:17:41,480 --> 00:17:43,520 Speaker 4: What are your sources telling you? 319 00:17:45,560 --> 00:17:48,680 Speaker 7: Look, the reality is, at the end of the day, 320 00:17:48,720 --> 00:17:51,440 Speaker 7: there's only so much we can all know. Whether it's 321 00:17:51,560 --> 00:17:58,320 Speaker 7: intelligence services or DoD or whichever government agency you look at, 322 00:17:58,400 --> 00:18:03,760 Speaker 7: even the IAA, the un clear watchdog, they really cannot 323 00:18:04,200 --> 00:18:08,400 Speaker 7: judge much by just looking at satellite images. The only 324 00:18:08,480 --> 00:18:10,560 Speaker 7: way to get a full picture is to get the 325 00:18:10,600 --> 00:18:13,399 Speaker 7: inspectors back on the ground, to be able to go 326 00:18:13,560 --> 00:18:16,679 Speaker 7: into these tunnels and see the degree of damage that 327 00:18:16,720 --> 00:18:18,480 Speaker 7: has been done. But there are two things we know 328 00:18:18,600 --> 00:18:22,199 Speaker 7: for sure. One, as Vice President jd. Evan said the 329 00:18:22,240 --> 00:18:25,920 Speaker 7: other day, the Iranians had moved the stockpile of near 330 00:18:25,960 --> 00:18:29,080 Speaker 7: bomb grade and rich uranium that they had about four 331 00:18:29,160 --> 00:18:33,679 Speaker 7: hundred kilograms. And also they have a stockpile of advanced centrifutures, 332 00:18:33,720 --> 00:18:37,160 Speaker 7: and those two things still provide them with a pathway 333 00:18:37,160 --> 00:18:37,760 Speaker 7: to a bomb. 334 00:18:38,119 --> 00:18:43,080 Speaker 2: So that tells me Alivice that the determinant here is 335 00:18:43,080 --> 00:18:47,000 Speaker 2: Israeli intelligence. I think we can all agree that the 336 00:18:47,080 --> 00:18:51,560 Speaker 2: Israeli intelligence into Iran has been extraordinary and making this 337 00:18:51,720 --> 00:18:54,440 Speaker 2: up folks, but stay with me, but Ali vas I 338 00:18:54,480 --> 00:18:58,160 Speaker 2: mean that's that we don't learn this from a presidential 339 00:18:58,200 --> 00:19:00,960 Speaker 2: statement in front of Marine one. We're going to learn 340 00:19:01,000 --> 00:19:05,280 Speaker 2: this from traditional espionage and intelligence by Israel. 341 00:19:05,400 --> 00:19:10,240 Speaker 7: Right, that is correct, But there is also the reality 342 00:19:10,320 --> 00:19:13,960 Speaker 7: that this kind of intelligence, when you go all out 343 00:19:14,040 --> 00:19:16,440 Speaker 7: and using it the way Israel used it in its 344 00:19:16,480 --> 00:19:20,600 Speaker 7: opening salvo of its strike on Iran. You also lose 345 00:19:20,960 --> 00:19:23,080 Speaker 7: a lot of your assets on the ground, so it 346 00:19:23,080 --> 00:19:27,240 Speaker 7: becomes harder to do this again and again. And in 347 00:19:27,280 --> 00:19:31,560 Speaker 7: any case, even Israeli intelligence had admitted that the military 348 00:19:31,600 --> 00:19:34,760 Speaker 7: solution would set back Iran's nuclear program by a few 349 00:19:34,800 --> 00:19:38,800 Speaker 7: months to maybe one to two years at max. Remember 350 00:19:38,840 --> 00:19:41,200 Speaker 7: we had a nuclear deal with Iran in twenty fifteen. 351 00:19:41,680 --> 00:19:45,320 Speaker 7: That agreement sets back Iran's nuclear program by fifteen years 352 00:19:45,359 --> 00:19:48,680 Speaker 7: without firing a shot. So it's a simple math calculation 353 00:19:48,760 --> 00:19:50,320 Speaker 7: of which one is more beneficial. 354 00:19:51,000 --> 00:19:53,960 Speaker 2: Ali, thank you so much. As with us are In Project, 355 00:19:53,960 --> 00:19:57,960 Speaker 2: director of the Crisis Groups are In Project, is le 356 00:19:58,119 --> 00:20:05,560 Speaker 2: recent essay in Foreign Affairs magazine. 357 00:20:06,920 --> 00:20:10,840 Speaker 1: This is the Bloomberg Surveillance Podcast. Listen live each weekday 358 00:20:10,840 --> 00:20:13,880 Speaker 1: starting at seven am Eastern on Apple Corplay and Android 359 00:20:13,880 --> 00:20:16,880 Speaker 1: Auto with the Bloomberg Business app. You can also watch 360 00:20:16,960 --> 00:20:19,919 Speaker 1: us live every weekday on YouTube and always on the 361 00:20:19,960 --> 00:20:21,040 Speaker 1: Bloomberg Terminal. 362 00:20:21,200 --> 00:20:25,800 Speaker 2: Alisia Levine, head of Investment Strategy Equities at BNY, this 363 00:20:25,840 --> 00:20:28,879 Speaker 2: is what the show's about. You got Sam Stovall, with 364 00:20:28,920 --> 00:20:31,240 Speaker 2: all that heritage. You and I this is before you 365 00:20:31,240 --> 00:20:33,879 Speaker 2: are at Brown you and I worshiped his father, Robert 366 00:20:34,119 --> 00:20:37,280 Speaker 2: stolevall years ago with lou Rukaiser and all that and 367 00:20:37,359 --> 00:20:41,119 Speaker 2: Alisia Levine. To bring it over to your rigid and 368 00:20:41,280 --> 00:20:46,600 Speaker 2: magical mathematics, I think is incredibly important. What is the 369 00:20:46,680 --> 00:20:50,800 Speaker 2: convexity of this pain trade right now in this new 370 00:20:50,880 --> 00:20:54,240 Speaker 2: bull market? What the accelerated force is shocking? 371 00:20:54,800 --> 00:20:58,919 Speaker 8: It's shocking. The if I if I just wrote on 372 00:20:58,960 --> 00:21:01,879 Speaker 8: a piece of paper and that old fashioned way of 373 00:21:01,920 --> 00:21:04,280 Speaker 8: what's going on in the world, a list of facts, 374 00:21:05,000 --> 00:21:08,000 Speaker 8: dispassionate facts. The fact that the S and P is 375 00:21:08,080 --> 00:21:11,159 Speaker 8: up this year is actually extraordinary, which tells you the 376 00:21:11,200 --> 00:21:14,080 Speaker 8: pain trade is higher. The pain trade is higher because 377 00:21:14,080 --> 00:21:17,760 Speaker 8: there's so much negativity. Every conference I go to, every 378 00:21:17,800 --> 00:21:22,600 Speaker 8: discussion I have, is about looming inflation, the crushing of growth, 379 00:21:23,160 --> 00:21:27,639 Speaker 8: the all these terrible policies, and the market's telling you 380 00:21:27,680 --> 00:21:29,959 Speaker 8: that it's not going to be that bad, and that 381 00:21:30,000 --> 00:21:33,479 Speaker 8: we really have to quiet the noise around us in 382 00:21:33,480 --> 00:21:36,440 Speaker 8: our in our heads and look at profitability of companies, 383 00:21:36,480 --> 00:21:40,080 Speaker 8: which is what we do as investors. Right So you 384 00:21:40,119 --> 00:21:42,879 Speaker 8: know the reason that tariffs were such a shock to 385 00:21:42,920 --> 00:21:45,800 Speaker 8: the market and the market sold off twenty percent, essentially 386 00:21:45,840 --> 00:21:48,159 Speaker 8: pricing in two thirds of the way pricing in a 387 00:21:48,200 --> 00:21:52,560 Speaker 8: recession is that that original level of tariffs was over 388 00:21:52,640 --> 00:21:56,080 Speaker 8: two percent of us GDP at six hundred and fifty 389 00:21:56,240 --> 00:21:59,320 Speaker 8: billion dollars. Well, that sends a two percent growth economy 390 00:21:59,320 --> 00:22:01,760 Speaker 8: into recession, right, So that's why the market price in 391 00:22:01,800 --> 00:22:04,879 Speaker 8: the recession so quickly. As the tower's been rolled back, 392 00:22:05,040 --> 00:22:07,280 Speaker 8: you're back to a growth area of somewhere between one 393 00:22:07,359 --> 00:22:11,440 Speaker 8: and two percent, and the margins on the SMP are 394 00:22:11,480 --> 00:22:15,520 Speaker 8: going higher, on the tech companies and communication service companies, 395 00:22:15,560 --> 00:22:18,240 Speaker 8: and so the market's going higher as everybody's ringing their 396 00:22:18,280 --> 00:22:21,080 Speaker 8: hands and talking about how how terrible it all is. 397 00:22:21,800 --> 00:22:23,920 Speaker 5: Do you think there's still earnings risk in this market? 398 00:22:23,920 --> 00:22:25,280 Speaker 5: Because I think earnings are going to have to be 399 00:22:25,400 --> 00:22:28,080 Speaker 5: a big driver of market performance. If the Fed's only 400 00:22:28,119 --> 00:22:30,639 Speaker 5: going to give you one or two rate cuts in 401 00:22:30,680 --> 00:22:32,359 Speaker 5: then this year, maybe, so I. 402 00:22:32,280 --> 00:22:36,160 Speaker 8: Do think that to sustain the market here move higher, 403 00:22:36,160 --> 00:22:39,199 Speaker 8: you have to expect earnings moving higher, not necessarily in 404 00:22:39,200 --> 00:22:41,760 Speaker 8: the next few quarters, but for twenty twenty six, right, 405 00:22:41,760 --> 00:22:44,800 Speaker 8: because you know, over the summer investors start looking at 406 00:22:45,119 --> 00:22:47,480 Speaker 8: four or twelve months, look at twenty twenty six earnings. 407 00:22:47,560 --> 00:22:49,320 Speaker 8: I think the market is probably telling you that's what's 408 00:22:49,320 --> 00:22:52,639 Speaker 8: going to happen. The risk here is that we become 409 00:22:52,720 --> 00:22:56,320 Speaker 8: a little complacent from the blowout earnings of Q one 410 00:22:56,480 --> 00:22:59,720 Speaker 8: coming in at thirteen percent when seven percent was expected. 411 00:23:00,440 --> 00:23:03,200 Speaker 8: It does sterilize the rest of the year in terms 412 00:23:03,240 --> 00:23:05,679 Speaker 8: of downward pressure on earnings because you can bring that 413 00:23:05,720 --> 00:23:08,600 Speaker 8: back in for the year. But then we just kind 414 00:23:08,640 --> 00:23:10,320 Speaker 8: of go to sleep on the fact that there is 415 00:23:10,359 --> 00:23:14,240 Speaker 8: some earnings risk. And clearly on the retail side, you've 416 00:23:14,359 --> 00:23:17,600 Speaker 8: seen some demand destruction and you're going to have some 417 00:23:17,720 --> 00:23:20,240 Speaker 8: margin risk from the imports, like you can see that 418 00:23:20,720 --> 00:23:21,840 Speaker 8: Tony Ism. 419 00:23:21,520 --> 00:23:25,400 Speaker 5: Numbers exactly, and the the inflation levels. You know, before 420 00:23:25,440 --> 00:23:27,560 Speaker 5: this whole process, there were you know, three percent ish 421 00:23:27,840 --> 00:23:30,960 Speaker 5: I'm sorry, the tariff levels were roughly three percentage. Now 422 00:23:30,960 --> 00:23:33,840 Speaker 5: they seem to be ten eleven, twelve, thirteen percent something 423 00:23:33,840 --> 00:23:36,040 Speaker 5: in that range, not the twenty or thirty or fifty 424 00:23:36,080 --> 00:23:38,359 Speaker 5: percent that maybe was the concern, but still they're a 425 00:23:38,400 --> 00:23:38,960 Speaker 5: lot higher. 426 00:23:39,000 --> 00:23:39,639 Speaker 6: A lot higher. 427 00:23:39,800 --> 00:23:41,639 Speaker 5: Is Corporate America just going to take that in the 428 00:23:41,680 --> 00:23:44,720 Speaker 5: margin because it doesn't I guess that or they can 429 00:23:44,720 --> 00:23:45,760 Speaker 5: be passed along to consumers. 430 00:23:45,800 --> 00:23:46,680 Speaker 4: We're not really sure yet. 431 00:23:46,680 --> 00:23:48,479 Speaker 8: I guess I think we don't really know. Okay, Like 432 00:23:48,560 --> 00:23:52,320 Speaker 8: there's some discussion that also the the exporters to us 433 00:23:52,400 --> 00:23:53,840 Speaker 8: are going to eat some of it as well. I 434 00:23:53,880 --> 00:23:56,000 Speaker 8: think we actually don't know. If I go back to 435 00:23:56,040 --> 00:23:58,080 Speaker 8: twenty eighteen, and of course the scale of the towers 436 00:23:58,080 --> 00:24:01,200 Speaker 8: are much lower, so maybe it is an perfect look back. 437 00:24:01,440 --> 00:24:05,680 Speaker 8: But actually inflation fell over twenty eighteen, really yes, because 438 00:24:05,720 --> 00:24:07,639 Speaker 8: there was a little bit of demand destruction in the 439 00:24:07,680 --> 00:24:11,239 Speaker 8: areas which had tariffs. So I think we don't actually know. 440 00:24:11,359 --> 00:24:14,760 Speaker 8: And in twenty eighteen the exporters eighth part of the 441 00:24:14,880 --> 00:24:19,080 Speaker 8: tariff hit. This is much more extensive. It is akin 442 00:24:19,200 --> 00:24:23,280 Speaker 8: to a consumption tax. I think there'll be rapid substitution 443 00:24:23,840 --> 00:24:27,439 Speaker 8: on whatever is being tariffed. I think you see that 444 00:24:27,520 --> 00:24:30,040 Speaker 8: fairly quickly. But it does mean that there's going to 445 00:24:30,080 --> 00:24:32,560 Speaker 8: be some hit to certain sectors of the economy. I 446 00:24:32,600 --> 00:24:34,960 Speaker 8: think likely tariffs wind up a little bit lower. 447 00:24:35,760 --> 00:24:36,760 Speaker 2: Can I go nerd? 448 00:24:37,119 --> 00:24:37,359 Speaker 4: Sure? 449 00:24:37,480 --> 00:24:40,240 Speaker 2: So? Okay, it's like it's one hundred degrees. You know, 450 00:24:40,680 --> 00:24:44,240 Speaker 2: the beautiful Lego Starship in Alicia Levine's living room is 451 00:24:44,280 --> 00:24:46,440 Speaker 2: melting right now from the keat. 452 00:24:46,960 --> 00:24:47,800 Speaker 8: It's got its own air. 453 00:24:48,160 --> 00:24:50,400 Speaker 2: Doctor Levine I'm going to go back to your mathematics 454 00:24:50,400 --> 00:24:52,440 Speaker 2: at Chicago, and I'm going to take it back to 455 00:24:52,480 --> 00:24:55,280 Speaker 2: game theory. I went back and forth with Mohamed Hilarian 456 00:24:55,320 --> 00:24:57,800 Speaker 2: this morning, and he is a king of unknown unknown 457 00:24:58,080 --> 00:25:00,840 Speaker 2: and the game theory. I take them market and speech 458 00:25:00,920 --> 00:25:04,199 Speaker 2: is from the Guadalcanal low of nineteen forty two. You 459 00:25:04,240 --> 00:25:07,119 Speaker 2: take the IBOCON chart log s and p. Five hundred 460 00:25:07,440 --> 00:25:10,199 Speaker 2: and you enjoyed the leap out of seventy five. And 461 00:25:10,280 --> 00:25:13,880 Speaker 2: many people will say the extrapolation of a bull market 462 00:25:14,040 --> 00:25:17,960 Speaker 2: started eighty eighty one eighty two off we went. Is 463 00:25:18,000 --> 00:25:21,040 Speaker 2: that what we're missing right now is that kind of 464 00:25:21,119 --> 00:25:25,879 Speaker 2: log linear lift in equities. It was a surprise in 465 00:25:26,000 --> 00:25:29,000 Speaker 2: seventy five, a surprise in the early eighties. 466 00:25:29,200 --> 00:25:32,359 Speaker 8: So I think it's hard for me to see us 467 00:25:32,359 --> 00:25:34,760 Speaker 8: getting to three percent growth, right. What you had in 468 00:25:34,800 --> 00:25:37,960 Speaker 8: the eighties was three percent growth. So that's really what 469 00:25:38,000 --> 00:25:41,240 Speaker 8: you need for nominal earnings, right, because earnings are nominal 470 00:25:41,800 --> 00:25:46,080 Speaker 8: and growth is nominal. The thing here is, I just 471 00:25:46,200 --> 00:25:50,400 Speaker 8: think what everybody's missing is the resiliency of corporate America 472 00:25:51,080 --> 00:25:54,560 Speaker 8: and the resiliency of households. Of households. I have a 473 00:25:54,640 --> 00:25:58,800 Speaker 8: chart that I use which shows the crushing of the 474 00:25:58,960 --> 00:26:03,040 Speaker 8: household's balance sheet of debt to assets. It is a 475 00:26:03,200 --> 00:26:07,880 Speaker 8: crushing from fifteen years ago of the global financial crisis. 476 00:26:07,920 --> 00:26:11,920 Speaker 8: It's basically been cut in half. Households are so resilient 477 00:26:12,000 --> 00:26:15,119 Speaker 8: and there are fifty three trillion dollars wealthier than they 478 00:26:15,119 --> 00:26:19,159 Speaker 8: were five years ago. So your assets, your financial assets, 479 00:26:19,160 --> 00:26:24,159 Speaker 8: are going higher and your liabilities as a percent of 480 00:26:24,200 --> 00:26:27,359 Speaker 8: assets are going lower. So you've got healthy balance sheets 481 00:26:27,359 --> 00:26:29,520 Speaker 8: in the household sector. All that debt, of course was 482 00:26:29,560 --> 00:26:32,800 Speaker 8: transferred to the government. But the households are resilient, and 483 00:26:32,880 --> 00:26:37,080 Speaker 8: corporate America is resilient. Large cap are resilient, less so 484 00:26:37,160 --> 00:26:39,879 Speaker 8: for small cap because they've got floating right debt, but 485 00:26:40,160 --> 00:26:44,480 Speaker 8: during a place where there's much more resiliency than the 486 00:26:44,520 --> 00:26:45,920 Speaker 8: conversation we're hearing is. 487 00:26:46,840 --> 00:26:50,240 Speaker 5: But the concern on that side the household income. More 488 00:26:50,240 --> 00:26:53,240 Speaker 5: than fifty percent of US households don't hold assets. That's true, 489 00:26:53,320 --> 00:26:54,280 Speaker 5: So that's a problem. 490 00:26:54,400 --> 00:26:57,240 Speaker 8: Yes, Okay, so I'm going to sound ruthless here. Okay, 491 00:26:57,280 --> 00:26:58,920 Speaker 8: but I'm going to say that they don't go into 492 00:26:58,920 --> 00:27:02,679 Speaker 8: the number of shocker, they don't go into the aggregate numbers. 493 00:27:02,720 --> 00:27:06,840 Speaker 8: It is true that the lower quartile of income has 494 00:27:06,920 --> 00:27:10,159 Speaker 8: been suffering, and they've been suffering since the rate hikes 495 00:27:10,200 --> 00:27:13,000 Speaker 8: of twenty twenty two, when the free money stopped and 496 00:27:13,119 --> 00:27:18,919 Speaker 8: those households borrow short, not long, and what sterilized households 497 00:27:19,000 --> 00:27:22,280 Speaker 8: and corporates is borrowing long. Rates were near zero. So 498 00:27:22,320 --> 00:27:23,639 Speaker 8: we've got three percent mortgages. 499 00:27:23,880 --> 00:27:25,560 Speaker 2: We got to leave it here out of time. When 500 00:27:25,560 --> 00:27:27,439 Speaker 2: you come back next time, I want to do a 501 00:27:27,520 --> 00:27:31,280 Speaker 2: definitive distinction between log normal and plus on distribution. 502 00:27:31,280 --> 00:27:33,000 Speaker 4: Oh that's going to work. Sho you to the audience. 503 00:27:33,119 --> 00:27:37,639 Speaker 2: La Alicia Levin, Thank you so much from BNI. 504 00:27:38,280 --> 00:27:43,119 Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify, 505 00:27:43,240 --> 00:27:47,520 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 506 00:27:47,640 --> 00:27:50,880 Speaker 1: seven to ten am Easter and on Bloomberg dot com, 507 00:27:51,040 --> 00:27:54,840 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 508 00:27:55,119 --> 00:27:58,240 Speaker 1: You can also watch us live every weekday on YouTube 509 00:27:58,560 --> 00:28:00,560 Speaker 1: and always on the Bloomberg terminal